The IMF is once again at Ghana’s bedside. A humiliation for President Nana Akufo-Addo. He was elected in 2016 and promised to do without international assistance from now on.
An IMF team conducted a first needs assessment mission on Wednesday. This is the fund’s 17th intervention since Ghana’s independence. The robust growth of recent years had given Ghanaians hope of rapid emergence. It is on this basis that the President gave a course to his country: Ghana Beyond Aid, Ghana Beyond Aid. But this largely debt-financed prosperity was fragile. The Ghanaian economy has not succeeded in moving out of the informal sector: out of 13 million jobs, only 2.4 million are declared and therefore taxable.
Covid and since the war in Ukraine have rolled the Ghanaian economy Events that have tipped all indicators red this year. Growth is sluggish, far below what is needed to bring in tax revenues. Government debt has soared, representing 80% of GDP. According to the latest figures published yesterday, inflation is close to 30%. Ghana is one of the African countries hardest hit by this brutal price increase. cedi, the national currency, has collapsed. Its value has fallen by 20% against the dollar since the beginning of the year. Ghanaians are now struggling to make ends meet on food and fuel, and they are loudly expressing their dissatisfaction in the streets. But the government can no longer help them, the coffers are empty and the current balance of payments deficit has exploded, making imports more difficult.
What does it mean to stop the crisis? To stop inflation, the central bank has already raised its policy rate twice, now at 19%. But these decisions must be made several months before their effect is felt. The state has introduced a new tax on electronic payments over 100 cedis, equivalent to 13 dollars. A heavily criticized tax of 1.5% that is far from sufficient to quickly save the treasury. The Ghanaian parliament is now without a majority, so it is impossible in these circumstances to adopt reforms. President Nana Akufo-Addo therefore decided to turn to the IMF, which he so desperately wanted to do without. It also pays the price for its past mistakes: the expenses financed by using debts have all too often been used to give gifts during the election period or to start pharaonic projects without any real impact on the economy.
Does Ghana take the same path as Sri Lanka? The threat of bankruptcy is less imminent than it was for the archipelago because its large debts fall due in 2023 instead. But the cost debt has soared and since the beginning of the year, the state has in practice not been able to turn to the market for financing. In a dead end, Accra therefore urgently needs new money from the IMF. The fund will of course require contributions, cuts or new taxes. A bitter drink that Ghanaians are not ready to swallow with their eyes closed.
► In short, the IMF reactivates its aid program for Pakistan and releases a $ 1 billion 170 million loan.
Vital aid for this country, which is also on the verge of default. In exchange, the government agreed to remove a number of energy subsidies and the price of fuel rose by 50%. Measures that the previous government had postponed. In total, current IMF assistance amounts to more than $ 4 billion.